Despite concerted international efforts to improve access to effective treatment for malaria,
stockouts of malaria drugs are frequent in the public sector. In this paper, we estimate the impact
of drug stockouts at public health facilities on the price paid for and quality of medicines received
by customers in the private sector. We identify the effect of competition by exploiting exogenous
fluctuations in the drug stock at public sector health facilities due to a centrally set delivery
schedule. We then compare outcomes before and after the scheduled delivery date for local
markets that do or do not include a public sector facility. We find that during stockouts, private
sector customers pay $0.75 (36 percent) higher prices on average. However, there is no
significant change in the quality of drugs received as measured by a handheld spectrometer, or the
likelihood that customers buy a correct doasge. We provide evidence that higher prices change
the composition of customers who seek to buy drugs in the private sector. Those with lower
levels of education and income appear most likely to drop out of the market in response to
stockouts. Frequent public sector stockouts may lead to poorer and less equitable outcomes for
patients in the short run and higher equilibrium price levels in the private sector in the long run.